“CO2 Trade War Hits Midwest” ? Not quite

Truthout lead with a story today saying:

CO2 Trade War Hits Midwest

“It’s round one in the 2010 fight against global warming and Minnesota has landed the first punch against coal-fired electricity that crosses its borders. The state is seeking to place a tariff on carbon dioxide turned out by coal plants in North Dakota.”

Similar stories are floating around such as:
The Start of Interstate Carbon Tariffs?

CO2 Wars Begin With World’s First Carbon Tariff

The World’s First Carbon Tariff. Sort of.

Alas, this isn’t what has actually happened.  A few excepts from an Order of the Minnesota Public Utility Commission (https://www.edockets.state.mn.us/EFiling/edockets/searchDocuments.do?method=eDocketsResult&userType=public#{12B0DA3E-BDE7-4102-B279-626C16181609}) :

In the Matter of Establishing an Estimate of the
Costs of Future Carbon Dioxide Regulation on
Electricity Generation Under Minn. Stat DOCKET NO. E-999/CI-07-1199
Sec. 216H.O6
ISSUE DATE: October 8, 2009
DOCKET NO. E-999/CI-07-1199
“On August 1, 2007, the Next Generation Energy Act became effective.1 Among other things, the Act provides for the Commission to estimate how the future regulation of carbon dioxide (CO2) emissions will affect the cost of generating electricity. The Act directs the Commission to establish a range of these estimates by January 1, 2008, to revise this estimate annually, and to use these estimates “in all electricity generation resource acquisition proceedings.” Minn. Stat Sec. 216H.06.”
“On December 21, 2007, the Commission issued an Order estimating that CO2 regulation of electricity generation will cost between $4.00/ton and $30.00/ton for CO2 emitted in 2012 and beyond.2”
“Minnesota Statutes Sec. 216H.06 reflects the Legislature’s conclusion that it is likely that eventually laws will govern the emission of CO2 and that utilities and their ratepayers will need to bear these costs. The statute’s chief requirement is to compel utilities to plan accordingly. A utility’s failure to correctly forecast the magnitude of CO2 regulation costs may result in the utility’s making choices that prove to be costly in retrospect, the same as any other forecasting error. But the forecasts themselves will neither increase nor decrease any utility’s wholesale costs or retail rates for electricity. They are simply planning tools, akin to any other forecast a utility makes.” [emphasis added.]
“…After eliminating both the low and high ends from consideration,4 the state agencies recommended $9 per ton as an appropriate value for the low end of the range, reflecting a median value among the lower prices utilized by two utilities in recent integrated resource plans (Xcel at $9.00 and PacifiCorp at $8.00). Finally, the state agencies recommended $34 per ton for the high end of the range of CO2 regulatory costs, as a median value of the eleven considered.”
“The ICND [Industrial Commission of North Dakota] recommended that the Commission update the cost estimate for North Dakota facilities to $0 per ton.”  “The Industrial Commission of North Dakota, Basin Electric Power Cooperative, and the Lignite Energy Council asserted that the CO2 values set by the Minnesota Commission should not apply to out-of-state facilities, relying on the Commission’s prior decision in the environmental externalities dockets”
“The Commission rejects this argument. In the environmental externalities dockets, the Commission elected not to exercise its authority to require utilities to impute an externality value to CO2 emitted by utilities beyond Minnesota borders. In contrast, and as explained in its December 21, 2007 Order in this docket, Minn. Stat. Chapter 216H unambiguously applies to electricity consumed in Minnesota, including electricity imported from outside the state.”

The PUC also updated the range of costs from 3-30 $/ton to 9-34 $/ton.

North Dakota coal interests don’t like this and, having failed at the Minnesota PUC, are threatening to sue, presumably in the federal courts.  Maybe that’s understandable, as recognizing future carbon costs in utility planning should tend to disadvantage coal.  But it isn’t a tariff, or a tax, or a trade war with North Dakota, or a violation of the Commerce clause of the US Constitution.  It’s just about recognizing reality in energy planning–not a easy concept to argue against.

The idea isn’t new at all; energy planning wonks have been advocating it for years and it’s finally getting implemented in an increasing number of jurisdictions.

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